Bush: Economy hung over but sound

'Foundations for growth' persist

President Bush spoke to business leaders in Birmingham, Alabama, on Monday.

BIRMINGHAM, Alabama (CNN) --President Bush sought Monday to reassure investors that the U.S. economy is sound, declaring in a speech that while it was suffering from a "hangover," the long-term outlook remained good.

But it was a tough day on Wall Street, marked by a sell-off for most of the day.

"Our economy is fundamentally strong. This economy has the foundations for growth, so people who want to find work can," Bush told an audience of business leaders gathered at the University of Alabama at Birmingham. "The American economy is constructed on confidence."

The major indexes fell as Bush spoke, reflecting jitters over a series of major corporate accounting scandals. Still, by the closing bell, stocks had staged a big comeback and managed to end mixed.

Bush, speaking with the slogan "Strengthening Our Economy" in the background, admonished, "America must get rid of the hangover we all have because of the economic binge we just went through," referring to the long period of inflated stock prices that sent Americans streaming into the market.

The president pointed to the hopeful economic signs of low inflation, sound monetary policy, low interest rates and increasing productivity. Gross domestic product for the first quarter of this year was just over 6 percent.

"That's a pretty good sign that the foundations for growth are there," Bush said. He said the manufacturing sector is recovering and retail sales were up 1 percent in June.

Bush repeated his call for corporate accountability and honesty.

"I expect and you expect the highest ethical standards in corporate America," he said.

Earlier this month, Bush proposed doubling the maximum prison term for corporate fraud and vowed to "end the days of cooking the books" after revelations of misdeeds by Enron, WorldCom and other major companies.

He also announced a new task force to pursue and prosecute corporate criminal activity.

The president said recent tax cuts should be made permanent, partly because they spur the growth of small businesses and create jobs.

Bush emphasized the need for high-quality education that teaches children the basics so they can qualify for good jobs as adults. And he warned Congress to hold the line on spending so the budget can be balanced in 2005.